GRASSROOTS/Hank Kalet

Shell Game

Seniors need a prescription drug benefit, but they need a
functioning Medicare system a whole lot more.

That should have been the guiding rationale when Congress set
about crafting drug legislation, but thanks to the political
miscalculation of AARP and a handful of Democrats, seniors instead
will get a nominal prescription drug plan that's part of a larger
legislative push to open Medicare to wholesale privatization.

The crux of the legislation is this trade-off: Seniors get $40
billion a year total in new drug benefits, but will be made subject
to means testing and higher premiums. In addition -- and perhaps
more importantly -- the legislation allows for experimental
programs in six metropolitan regions in which private insurers or
HMOs would offer services, luring seniors away from the traditional
Medicare program.

The drug plan is rather complicated. According to an explainer
that ran in the Washington Post in November, seniors would pay about
$420 a year for drug coverage. Once they met the plan's $250
deductible, the legislation would pay 75% of drug costs up to $2,250.
After that magic number, seniors would have to pay 100% of the next
$1,350 out of their own pockets, before insurance started picking up
the majority of the bill.

That's a big nut for seniors to have to carry -- and it comes
with a very heavy cost to taxpayers in the form of drug company
subsidies and slow death of the traditional Medicare system.

The plan also calls for private firms to administer the drug
benefit on a regional basis, with about $12 billion in subsidies
going to private insurers that offer basic health insurance,
including preferred provider organizations that rely on a network of
doctors but allow patients to go outside network if they pay extra
and more traditional fee-for-service plans.

More dangerous, however, is the introduction of competition into
Medicare, tied to the prescription drug benefit. The idea, as the
Boston Globe pointed out in an editorial, would be to "use the drug
benefit to prod older Americans into private health plans for all
their benefits."

Under the legislation, seniors in six metropolitan areas would be
made guinea pigs for privatization beginning in 2010. The plan would
subsidize private insurers -- about $12 million in seed money has
been set aside in addition to an increase in reimbursements to the
companies to encourage them to offer insurance to seniors in those
areas. If the private plans could provide cheaper services, premiums
for those in the traditional Medicare program would go up.

And as the cost of the government program were to rise, support
for it would erode, leading ultimately to its demise.

Robert Kuttner, co-editor of The American Prospect and a
columnist with the Globe, said the Bush "administration's real goal
is to shift Medicare from a public program to a private one, with the
government's contribution capped. For the right, it's a threefer:
contain government's costs, shift risks to consumers, and let private
industry cash in."

At the same time, he points out, "the Medicare legislation is
sheer genius" when "viewed as a bill for special interests."

"Pharmaceutical companies get to sell more drugs at prices they
set. Hospitals and doctors receive additional payments. Insurers get
to run a lucrative new program with government subsidies. And
corporations that are paying health benefits to retirees get new tax
breaks worth $18 billion."

E.J. Dionne Jr. in his Washington Post column rightly described
the Medicare bill as Bush's attempt to carve up the senior vote. But
all it has done is anger seniors.

The Post reported in late November, shortly after AARP began
running a multimillion dollar ad campaign supporting the drug bill
that an AFL-CIO poll showed that "only 18% of AARP members agreed
with the organization's endorsement."

The paper also reported that "about two dozen disgruntled AARP
members from Maryland, New York and Pennsylvania gathered in the rain
outside the organization's downtown Washington headquarters to cut up
their membership cards." Other protests occurred in Boston, Miami and
around the country.

The bill "destroys one of the most successful programs in the
history of this country," Isaac Ben Ezra, president of the
Massachusetts Senior Action Council, told the Associated Press as he
led a demonstration of about 40 people in Boston. "Shame, AARP."